A lot of passive income stocks look appealing right now. As a result of economic uncertainty, valuations have fallen and yields have risen.
The thing is, these low valuations and high yields may not be around for long, as the financial landscape can change quickly. With that in mind, here are three stocks investors should consider buying before 2024.
One of my top ideas for passive income right now is HSBC (LSE: HSBA). It’s currently forecast to pay out 64 cents per share in dividends for 2023, which puts the stock’s yield at around 8.4% at today’s share price and exchange rate.
Like a lot of bank stocks, HSBC is really cheap right now. Currently, it trades on an earnings multiple of around six.
That seems like an opportunity to me given the bank’s exposure to high-growth markets such as Asia and India.
It’s worth pointing out that the weak economic environment is a risk here. China’s commercial property market, in particular, is one factor that can’t be ignored.
However, I like the risk/reward set-up at the current share price. And I’m encouraged by the fact the bank is buying back its own shares.
Next up is pharma giant GSK (LSE: GSK). It’s forecast to pay out 57.5 cents per share in dividends for 2023, which puts its yield at about 4.1%.
Healthcare stocks have really struggled in 2023 and GSK is no exception. This year, its share price has gone backwards.
However, I think 2024 could be a better year for the sector. This is an industry with several long-term growth drivers, including the expanding global population and increasing prevalence of cancer.
It’s also a sector that’s very resilient and generally unaffected by economic weakness.
Now GSK does have some stock-specific risks. Zantac litigation is one. This has added some uncertainty to the investment case.
Yet I feel that a lot of risks are baked into the share price and valuation already. Currently, the price-to-earnings (P/E) ratio here is just nine. That’s low for a well-established, global pharma company.
Finally, I like the look of Coca-Cola bottling partner Coca-Cola HBC (LSE: CCH). It currently has a P/E ratio of about 12 and a yield of just under 4%.
This stock has experienced quite a significant pullback (around 15%) since mid-May and I see an opportunity. Recent results were solid with Q3 revenue up 4% year on year.
Meanwhile, the company reiterated its full-year guidance (it expects mid-teens full-year organic revenue growth) and said it has a high degree of confidence in its broad beverages portfolio.
Of course, consumer tastes and preferences could change, impacting the growth story here.
However, with a diverse portfolio that includes a vast range of beverages ranging from soft drinks such as Coke and Fanta to alcoholic drinks such as Aperol and Finlandia, I think this company is well placed for long-term success.